Friday, March 27, 2009

Scotland must lift ban on Class Action litigation as European Parliament supports proposals on competition law

As the Dean of the Faculty of Advocates, Richard Keen QC recently said himself, its time for the ban on Class Action lawsuits in Scotland to be lifted.

Although the Dean himself seemed to be more interested in taking on the banks, the long standing peculiarly Scottish prohibition of consumers banding together to take on big business and companies that breach their rights or provide sharp practice in consumer services, should now be at an end.

Over to Justice Secretary MacAskill & Holyrood for some quick legislation to bring Scots consumer protection in line with most other countries … (not ! – Ed)

The European Parliament has backed European Commission proposals that would allow consumers to band together to take action against companies that breach competition law.

The proposals echo some of the attributes of class action law suits, cases permitted in the US in which many people affected by a company's behaviour act together against that company and share the proceeds of a payout.

The Commission's proposals specifically say that they are not intended to create a litigation culture, but say that some action is necessary to allow consumers legal protection against companies which breach competition law.

"[Competition Commissioner Neelie Kroes] shares Parliament's view that collective redress mechanisms are necessary to give consumers and small businesses a realistic and efficient possibility to obtain compensation in cases of scattered damage, and that these mechanisms must include appropriate safeguards against excessive or abusive litigation," said a Commission statement after the Parliament vote.

Parliament had received a report on the Commission's recommendations and backed them by 498 votes to 11, with 17 abstentions.

The Commission's White Paper addresses the problem that competition law breaches often harm massive numbers of people in relatively small ways. The Commission is seeking to punish those breaches without many very small cases having to be brought.

"The European Parliament confirms the Commission’s findings that many victims harmed by EC competition law infringements are currently prevented from obtaining the compensation they are entitled to under the Treaty," said a Commission statement. "The European Parliament stresses that collective redress – with appropriate safeguards – is necessary, and that proposals to help victims gain compensation must not be delayed."

"I am delighted that the European Parliament shares the Commission’s view that something needs to be done to ensure that the victims of competition breaches finally get the compensation they are entitled to," said Kroes. "I am particularly pleased that today's resolution is based on a wide consensus across most political groups."

The Commission said that victims of competition law infringements forego billions of euros a year in compensation payouts because of the ineffectiveness of the law.

The Commission published its plans in its White Paper a year ago, saying that in most EU countries there were barriers to consumers receiving compensation for competition law breaches, such as the abuse of dominant market positions.

"The recommendations balance rights and obligations of both the claimant and the defendant and include safeguards against excesses and abuses of litigation," the Commission said.

“Consumers who are victims of illegal activities, such as overcharging, misleading advertising or outright scams, have a right to compensation," said Consumer Commissioner Meglena Kuneva when the Commission consulted on the proposals last year. "Currently, particularly where there are small scattered claims, this right is often theoretical because of the obstacles to exercising it in practice."

"There is a justice gap, a welfare gap and there are black holes in our redress system that is leaving consumers with nowhere to go. The present situation is clearly unsatisfactory. We must find a way to make the basic right to consumer redress a reality for more people," she said.

The Commission's research had found that privately brought antitrust claims for damages were extremely rare, meaning that companies that had broken the law were not being punished.

It said that it believed collective redress would encourage more cases to be brought.

It is now up to the Commission to decide what steps should be taken next to implement its plans.